Saturday, December 15, 2007

Canadian Group Asks for 3 More Months to Convert Debt (Update1)

By Doug Alexander

Dec. 15 (Bloomberg) -- A group representing investors holding about C$35 billion ($34.4 billion) of frozen asset-backed commercial paper in Canada wants more time to restructure the debt into longer-term notes.

``We have come a long way towards a successful outcome,'' Toronto lawyer Purdy Crawford, who heads an investors' committee charged with the restructuring, said today in an e-mailed statement. ``I encourage our ABCP investors to allow us a short time longer to finish the task.''

Canada's market for commercial paper sold by non-bank dealers ground to a halt in August after Coventree Inc. and other trusts failed to renew maturing debt because investors were concerned about ties to U.S. subprime mortgages. Banks refused to provide backup financing, freezing the market and putting funds at risk of collapsing.

A group of foreign banks, Canadian lenders and pension funds led by Caisse de Depot et Placement du Quebec negotiated the so-called ``Montreal Proposal'' standstill on Aug. 16 and agreed to convert the short-term debt into longer-term notes.

Crawford's committee said it would extend the standstill agreement to Jan. 31. The group plans to complete terms of the restructuring by March 14, and Crawford said it ``remains committed to delivering a final implementation'' in the first quarter.

The committee, which sought to have a process in place by a Dec. 14 deadline, said it ``is working to settle certain issues and to finalize the term sheets as well as the syndication of a margin funding facility'' to support the restructured assets.

Three Solutions

The group is handling 21 remaining trusts that haven't traded since mid-August and that hold about C$33 billion of outstanding commercial paper, according to the statement. One fund, the C$2.1 billion Skeena Capital Trust, has already been restructured under the process and awaits investor approval.

The plan will have three different solutions based on the assets backing the trusts, the statement said. One will be for about C$3 billion worth of commercial paper backed by ``traditional, unleveraged'' assets. Another will be for about C$3 billion in commercial paper supported by U.S. subprime assets. A third will be for commercial paper that has a combination of leveraged and unleveraged assets, which makes up about C$27 billion of the frozen debt.

Crawford's group also is considering an investment grade rating of the restructured notes and a credit line, according to the statement.

The Caisse, Canada's biggest pension-fund manager, is the largest holder of non-bank issued commercial paper, with about C$13.2 billion. Other large holders include National Bank of Canada, the country's sixth-biggest, ATB Financial, an Alberta bank, and Transat A.T. Inc., owner of Canada's largest charter airline.